New Owner, New Small Dealership. Help please…

[PKcars]

Hi guys,
I just opened a small size Dealership. I have bought and sold cars on the side before and I decided to take another step further. I know operating an actual Dealership is completely different than just selling cars on the side, mostly due to constant upkeep and fixed overhead costs.

I have developed a business plan and I am the only Owner/ Operator of the business. I have LLC entity.

Anyway, I on a budget constraint and I am simply weighing my options here. I have done my due diligence and below is a list of items that I have researched and came up with;
1) A small size lot. About 4-6 cars maximum. Lease $1000 per month.
2) Surety Bond- $980 per year. This whole amount has to be paid up front.
3) Garage Liability Insurance- $3,200 per year.
4) Utilities (Internet, phone, elect etc)- Approximately $300 per month.
5) Frazer Dealer Management Software- $450 per year.

I intend to pay the DMS, bonding and insurance fees upfront. So this would leave me with only the lease and utilities as monthly overhead costs.

After paying the insurance and bonding, I will still have about $30K CASH that I could put towards my new inventory. Maybe buy 6 cars worth $5000 each. No floor plans from my end. And no financing any cars that I sell.

I intend to stay away from the local Dealer Auction as of now. I really don’t want to be involved in bidding war on cars. My primary source of inventory would be from local ‘for sale by owners’. I know a thing or two about low balling and it has worked pretty well in the past.

As for marketing, there is a local website that all owners and Dealers list their cars for sale. I will not be incurring any marketing costs.

I know and completely understand that success of my business will depend on my own individual effort. I am pumped up and I am ready to be as aggressive as possible.

That said, my startup capital is really low as it is. I really need some honest opinion/ feedback (positive/ negative) as it pertains to my set up.

What would you recommend?


Thanks.

[rd3311]

my startup capital is really low as it is.

You have to start somewhere if you want to play in this "game".

I would say since you only have space for only 4-6 cars and a grand rent factor, try to turn the cars as quickly as you can to generate revenue.

Forget the 30 day rule on keeping a unit in stock, you need to play at ten days to make this entire effort worth while.

[s-works]

I would arm yourself with a wholesale book, have access to manheim averages and would not be afraid to watch some auctions. A huge positive about a (reputable) auction is they do an inspection on the car and should list any issues they find. After the sale you can do a post sale inspection and they will go through it pretty good. Any major issues found can void the sale. I would call on a dealership or two and maybe buy some of their old inventory or customer trade ins. Tell them you are paying cash when title is present.

Ed

[XDCX]

Originally Posted by rd3311

I would say since you only have space for only 4-6 cars and a grand rent factor, try to turn the cars as quickly as you can to generate revenue.

Forget the 30 day rule on keeping a unit in stock, you need to play at ten days to make this entire effort worth while.

I was thinking the same thing.

Initially I was thinking should he go for "volume or gross" but in his case I think volume is the only answer. A quick turn of vehicles is probably the best way to get established and make a name for yourself in your market.

[XDCX]

Originally Posted by PKcars

Maybe buy 6 cars worth $5000 each. No floor plans from my end. And no financing any cars that I sell.

Do you plan on having any lenders for your customers or are you expecting that all of your customers will be cash deals?

Additionally, have you given any thought to partnering with an existing used car dealer in your market? While I know there are a lot of scams out there it still might be worth investigating if there are any used car dealers in your market that would allow you to sell vehicles on their lot for a per/unit fee. The benefit to you would be a lower monthly overhead and the elimination of a lot of start-up costs. The other benefit is you would have more flexibility to be away from the store to buy inventory since the other dealer would have staffing to keep the store open.